Evolution Apartments [2011] QBCCMCmr 379 (1 September 2011)

Last Updated: 27 September 2011

ADJUDICATOR’S ORDER
Office of the Commissioner
for Body Corporate and Community Management

CITATION:	Evolution Apartments [2011] QBCCMCmr 379
PARTIES:	Norman Coles (applicant) The Body Corporate (respondent) All owners (affected persons)
SCHEME:	Evolution Apartments CTS 38033
JURISDICTION:	Sections 227(1)(b) and 229(3)(a) of the Body Corporate and Community Management Act 1997 (Qld) (Act), applying the Act and the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module).
APPLICATION NO:	0765-2011
DECISION DATE:	1 September 2011
DECISION OF:	M A Schmidt, Adjudicator
CATCHWORDS:	APPLICATION FOR INTERIM ORDERS s.279 Act

INTERIM ORDERS MADE:

I hereby order that the application for an interim order to prevent Safeport Security Solutions Pty Ltd from carrying out any further work to install electronic locks within the building, is dismissed.

REASONS FOR DECISION
Introduction

[1] This application is brought by Norman Coles, an owner, against the Body Corporate, challenging the validity of several resolutions of the Annual General Meeting (AGM) of 7 June 2011 and also a Committee resolution made at a meeting of the Committee on 14 July 2011.
[2] The resolutions relate to the Caretaker’s storage of a luggage trolley in the reception foyer, the installation by the Caretaker of a vending machine in the common area kitchen on level 6, the use of an A4 page size area by the Caretaker on the Body Corporate notice board and the installation of electronic locks on doors within the building.
[3] Mr Coles seeks an interim order to prevent work being carried out by the contractor engaged by the Body Corporate (Safeport Security Solutions Pty Ltd – “Safeport”) to install electronic locks on doors within the building. This was the subject of resolution 23 of the AGM of 7 June 2011 and also a resolution of the Committee on 14 July 2011.
[4] In deciding whether or not to grant an interim order it is appropriate for me to consider:

1. Whether Mr Coles has raised any serious legal questions for me to determine.
2. Whether inconvenience likely to result from an interim order is outweighed by the potential detriment if the order is not granted.

Overview

Procedure and jurisdiction

[5] The application is to be resolved under the Act because it is a dispute between an owner and the Body Corporate about alleged contraventions of the Act.
[6] The Committee and Okapi Investments Pty Ltd (the submitter of the motions challenged) were invited to make a written submission in response to the request for interim orders. A submission was received from Active Lawyers & Consultants on behalf of the Committee.
[7] I have decided the application based on this written material and the most relevant arguments from this material are referred to below.
[8] Evolution Apartments is a high rise scheme in Brisbane city containing some 179 lots. The Committee advises that 105 lots are subject to a letting agreement and are used as overnight or short-term accommodation. The Body Corporate presently uses a system of swipe cards to allow access to the foyer, and to various common property areas such as the entertainment area on level 6, the sky lounge on level 35, the lifts and the car park. All apartments are accessed by traditional keys.
[9] The Committee further advises that the proposed electronic lock key card system is a system which is compatible with the existing system used to access all common areas of the scheme.

Analysis

[10] At this time, I am concerned with the application for an interim order and the threshold issue of whether interim orders are warranted. An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates.[1] Any order granted must be just and equitable in the circumstances.[2]
[11] It is not appropriate to consider the substantive issues in the application in detail at this time. To determine whether it is just and equitable to grant interim relief, however, it is relevant to briefly consider the issues raised in the application. As an interim order can be considered on an ex parte basis, an adjudicator must be satisfied that the application raises serious questions and that the balance of convenience between the parties justifies injunctive relief.

Serious question to be determined

[12] Resolution 23 (Install electronic locks on all doors) was worded as follows:

INSTALL ELECTRONIC LOCKS ON ALL DOORS – Motion by Ordinary Resolution proposed by Okapi Investments of Lot No 1

RESOLVED that the Body Corporate install electronic locks on all doors within the building.

VOTING – YES 28 NO 5 ABSTAIN 2

[13] At a Committee Meeting on 14 July 2011, the following resolution was passed:

Electronic Locks – three quotes tabled, (as presented at the AGM), Satport (sic) at $63,000, Onity at $53,000 & Vingcart at $90,000

Recommend to proceed with Satport (sic) as they can retro fit in with the existing equipment.

RESOLVED to engage Satport (sic) to install the electronic locks up to a cost of $63,000 subject to the Caretaker confirming the price and trying to obtain a better price and further that the treasurer be authorised to sign off on the final proposal.

[14] Resolution 23 is challenged by Mr Coles on various grounds, considered separately below.

Wording of Motion Unclear

[15] Mr Coles argues that resolution 23, as carried, commits the Body Corporate to install electronic locks on all doors within the building. Mr Coles states that there must be over a thousand doors within the building and would include sliding glass doors, cupboard doors (including those comprising common property and which are currently secured by key locks), doors to plant rooms and even lift doors The motion, states Mr Coles, lacks clarity and does not reflect the real intentions of the proposer. He alleges the Chairperson should have ruled the motion out of order on these grounds alone.
[16] The Committee refers to the explanatory material in relation to motion 23 and submits that it is clear to any reasonable reader of the material placed before lot owners prior to the AGM that what was proposed was a change of the apartment door locks, and not “a thousand doors within the building ... including sliding glass doors, cupboard doors ... and even lift doors”. The suggestion that resolution 23 requires each door in the building to be fitted with an electronic lock is beyond reasonable interpretation. The lack of merit of such a submission, states the Committee, is tacitly accepted by Mr Coles by reason of his request that the Body Corporate be ordered not to install such locks on the unit doors of owners that do not want them. The Committee states that it appears that Mr Coles does not understand that the doors to each unit are common property. The maintenance of those doors is the responsibility of the Body Corporate. It is also open for owners to resolve for the Body Corporate to make improvements to common property, for example, by installing an electronic lock system.
[17] In my view, Mr Coles’ objections to the wording of motion 23 are sound. The wording is, in my view, scant to say the least. It certainly does not comply with the CLEAR format (Concise, legal, economic, action-based, realistic) recommended by this office in the Information Brochure “Submitting motions for a body corporate meeting”. Specifically, the motion does not refer to the particular locks proposed to be installed, refers to “all” doors when it appears as though only apartment doors are contemplated, on admission by the Committee, and is not costed. Further, the particular contractor is not mentioned and no quote is referred to.
[18] I disagree that the deficiencies in the wording are sufficient to have compelled the Chairperson to rule the motion out of order, as Mr Coles suggests. However, at this stage, I consider Resolution 23 insufficient to authorise any action by the Body Corporate or any expenditure of body corporate funds. At best, it serves as an indication that owners are in favour of installing electronic locks and the Committee should further pursue this, for example, by obtaining quotes and submitting appropriate motions to a further general meeting.

Failure to Comply with sections 149(1)(a) and 150 Accommodation Module

[19] Mr Coles also argues that because motion 23 proposed the carrying out of work, the cost of which exceeds the relevant limit for major spending of $25,000 (as set at the 2010 AGM – see resolution 10), the provisions of section 150 of the Accommodation Module applied. Therefore, the motion should have been presented as a motion with alternatives. Mr Coles further argues that the amount involved exceeds the relevant limit for Committee spending of $35,800 and under the provisions of section 149(1)(a) of the Accommodation Module, should have been specifically authorised by ordinary resolution of the Body Corporate. Mr Coles claims that resolution 23 was not specific, as no monetary amount was stated.
[20] The Committee submits that the exception in section 150(6) applies (that it was not practicable to obtain two quotations) and therefore the motion did not need to be stated as a motion with alternatives (section 150(7)). The fact that additional quotations have been provided, states the Committee, does not interfere with this position as those quotes merely go towards establishing that the quotation supplied by Safeport was a reasonable one.
[21] The Committee elaborates further that the contractor that has been contracted to install the electronic locks, Safeport, is the only contractor that is able to supply the goods with the necessary characteristics, namely an electronic system that will work with current electronic locks.
[22] Even if the exception in section 150(6) is inapplicable, the Committee submits that no owner has been misled. Each owner was supplied with the motion with three quotations in relation to the installation of the electronic lock system. The prices of the system ranged from $53,878 for Onity, $63,877 for Safeport and $90,695 for Vingcard. It was clear to each owner, states the Committee, that the motion sought to have an electronic lock system installed. The Committee further states that no other owner has raised any concern with the resolution, or has claimed to be misled as to its meaning. If there was a requirement for a motion with alternatives, it is tolerably clear that the resolution would have been passed for one of the three alternatives, and that Safeport would be the most cost effective contractor.
[23] At this stage, I am not persuaded by the arguments advanced by the Committee that the exception in section 150(6) applies. The fact that three quotations have been obtained is sufficient proof of this. I also disagree with the Committee’s assertion that “if there was a requirement for a motion with alternatives, it is tolerably clear that the resolution would have been passed for one of the three alternatives, and that Safeport would be the most cost effective contractor”. It is impossible to know how owners would have voted if a motion with alternatives had been presented in accordance with the legislation. Any claim to the contrary is mere speculation. I further agree with Mr Coles that, in relation to the Committee resolution of 14 July 2011, the requirement specified in section 149(1)(a) that a proposal involving spending above the relevant limit for Committee spending must be specifically authorised by ordinary resolution of the body corporate was not satisfied by resolution 23.

Not a decision made for the benefit of owners

[24] A final challenge to the validity of resolution 23 is that it breaches section 94(1)(a) of the Act. This requires the body corporate to administer the common property and body corporate assets for the benefit of lot owners. Mr Coles claims that any proposal that does not have a benefit for owners as a result of the administration of common property by the Body Corporate is a breach of section 94(1)(a) and is therefore unlawful. Mr Coles argues that it is not sufficient for the proposer of the motion to claim that all owners will benefit when there are those owners who strongly disagree. He states that when the Body Corporate carries a motion forcing owners to install electronic locks on the entrance doors to their lots, some against their will, then the Body Corporate is not acting reasonably in administering the common property, especially when there is a readily available alternative to those owners who wish to have electronic locks installed. This alternative is detailed in two motions which Mr Coles has submitted to the Secretary for inclusion on the agenda of the next general meeting.
[25] The Committee claims that Mr Coles’ argument in this regard is flawed. It states that Mr Coles suggests that the term “for the benefit of the owners” in that section must mean that each and every owner of a lot must benefit, rather than the Body Corporate as a whole.
[26] At this stage, I am not persuaded by Mr Coles’ arguments that section 94(1)(a) has been breached. However, nor do I agree with the Committee that “it is uncontroversial that the use of an integrated card system is both convenient, and more cost effective, and more secure than the existing antiquated key system presently in place”.
[27] On the face of the application, at this stage, I believe Mr Coles has raised serious questions concerning the validity of resolution 23 of the AGM of 7 June 2011 and the Committee resolution of 14 July 2011. I do not propose to examine this issue in any further detail at this time. However, as a general proposition, a body corporate may validly resolve to ratify past irregular conduct[3]. Without making any findings as to whether or not entry into the Contract with Safeport was appropriately authorised, the Body Corporate could ratify entry into the Contract by passing an appropriate resolution at a future general meeting.

Balance of convenience

[28] An adjudicator must balance the inconvenience of granting relief now if final orders are ultimately refused against the inconvenience of refusing relief now if final orders are ultimately granted. Of particular relevance is evidence that an interim order is necessary to prevent serious or irreparable harm.
[29] In this regard, Mr Coles submits that he does not know whether the Treasurer has yet signed off on the final proposal. He states that if it is determined in the final orders that resolution 23 of the AGM of 7 June 2011 and the Committee resolution of 14 July 2011 are invalid, then considerable and costly work will have been carried out which will subsequently need to be reversed and remedied.
[30] In its submission, the Committee states that the Body Corporate has already entered into a binding contract with Safeport and has paid a 50% deposit for the supply and installation of Quantum locks. Safeport has used the deposit to obtain the necessary parts from the manufacturer in China. Those products were ordered prior to notification of the dispute, have been shipped and are expected to clear customs in Australia on 15 September 2011. At my request, the Committee has provided evidence of entry into the contract by the Body Corporate and payment of a 50% deposit.
[31] The Committee submits that it is reasonable to expect that if Safeport is not allowed to commence work within a reasonable time of the goods arriving, by reason of the Respondent being ordered not to proceed with the works until this matter is finally determined, it might terminate the contract (thus exposing the Body Corporate to a claim for breach), or perhaps charge the Body Corporate a holding fee if Safeport is to maintain possession of the electronic locks.
[32] Should the Body Corporate not be allowed to have the electronic lock system installed, the Committee submits that the body Corporate may suffer a loss at the very minimum of $30,000, by reason of the loss of the deposit. This figure alone is some three times higher than the cost difference between the cheapest quote provided.
[33] The Committee also believes that because an interim order is in the nature of injunctive relief, grounded in the rules of equity, regard must be had to the conduct of the Applicant. In this regard the Committee states that the delay in lodging this application is not excused by the mere fact that the Applicant was overseas when the Notice of Meeting for the AGM was posted out. The Committee claims that the Applicant, as a former Committee member, was aware of the motion from 17 April 2011, when the body corporate manger sent an email notifying the Committee members of the proposed motion.

Conclusion

[34] In the circumstances of this application, I agree with the Committee that the balance of convenience does not justify injunctive relief. The Body Corporate has already entered into a contract with Safeport and paid a deposit of $30,453.50 pursuant to that contract. Despite the above-mentioned deficiencies with Resolution 23, it was passed by a significant majority, with 28 votes in favour and only five against. The majority of owners who voted at the AGM (which I note is less than 1/5 of all owners – the meeting had to be adjourned and re-convened due to lack of a quorum) appear to be in favour of the installation of the electronic lock system. Further, the entry into the contract with Safeport can be ratified at a subsequent general meeting to overcome any deficiencies with resolution 23 of the 2011 AGM and the Committee resolution of 14 July 2011.
[35] This application will now be investigated in accordance with the usual processes of this office, including the calling of submissions from interested parties.

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[1] Section 279 of the Act
[2] Section 276 of the Act
[3] Warren v Body Corporate for Buon Vista [2007] QCA 160